After the surprise Bank of Ghana (BoG) interest-rate hike earlier this week, the prime rate seen at 21% rather than the previous 19% at end-2015.The BoG’s willingness to raise the prime rate to 22% to stabilise the currency suggests that interest rates will be kept higher for longer, even as Ghana’s inflation profile improves. “We had seen some likelihood of a 100bps cut in late Q3-2015, but we now think this will be deferred to late Q4, if it happens at all”, says Standard Chartered.Any inflation deceleration will require FX stabilisation, which to date has been elusive. While the authorities will likely seek lower market interest rates, especially for front-end yields, this is more likely to be achieved through reduced short-term debt issuance than policy easing.
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